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Facebook, Inc. (FB): The Bulls Are Getting Nervous

GBH Insights' Daniel Ives does not leave the bullish camp- but believes Cambridge data scandal presents a "major test" to FB's "golden" prospects.


Facebook, Inc. (NASDAQ:FB) shares have now shed 10% in value this week, with investors quaking at bad buzz words spelling out Cambridge Analytica data leak controversy.

GBH Insights analyst Daniel Ives may be sticking with the bulls on the social media titan, but he believes this has spiraled “into a dark chapter in the Facebook story;” one that could point to a jump in regulatory heat in the Beltway and European Union on the platform in the short-term.

With the grapevine churning that the Federal Trade Commission (FTC) is now angling to scrutinize the way CEO Mark Zuckberg’s giant utilizes users’ personal data. Did FB violate a government privacy deal when Cambridge Analytica gained access to over 50 million FB user profiles with eyes on political advantage? This is precisely what the FTC seeks to investigate here.

It’s the kind of “brush fire” that just keeps spreading, and Ives anticipates “a hand holding time ahead for investors with uncertainty abound,” even from his bullish stance on the titan. The analyst likewise wagers that should Zuckerberg tackle the predicament wisely and emerge from the fire, this risk will be “manageable” and predominantly “noise” in the end.

However, “If this data leak fiasco is left to fester it could take on a life of its own leading to tougher regulatory oversight/chatter down the road in our opinion. This will be an overhang on the stock until the Street can get a better handle on if any changes to Facebook’s advertising and content model are in store as uncertainty is a black cloud over the name in the near-term. The 10%+ decline in shares of Facebook over the last few days speaks to the broader worry on the Street that the company’s advertising fortress and Teflon-like social media platform with 2 billion users and growing faces a major test to get through this Cambridge data crisis with its core business model still intact with regulatory headwinds swirling and roughly $4 billion-$5 billion of annual advertising revenues potentially ‘at risk’ in our estimation,” Ives contends.

At the end of the day, even as Ives keeps a careful watch on the Cambridge Analytica drama unfolding around the company, he continues to bet that “Facebook can keep regulators at bay and not significantly impact its golden business model.”

As such, the analyst reiterates a Highly Attractive rating on FB stock with a $225 price target, which implies a just under 36% upside from current levels. (To watch Ives’ track record, click here)

TipRanks indicates this social media darling has garnered standout confidence on the Street. Out of 32 analysts polled in the last 3 months, 29 are bullish on FB stock, 2 remain sidelined, while 1 is bearish on the stock. With an encouraging return potential of 35%, the stock’s consensus target price stands at $227.37.